Negative press coverage can lead to positive change: study

It’s one of the most frequent refrains among communicators who often feel they don’t get enough respect in their companies. In the executive C-suite, leaders make decisions about company strategy. Outside views that are reported in the press but never weighed by leaders can lead to bad decisions.

Without a communications officer at the table, who will direct leaders’ attention to the coverage the company has been getting? Depending on their level of interest, individual executives may read some of the articles covering the organization, but it’s the PR department’s job to monitor coverage, analyze it, and convey its meaning. Leaders who grasp what’s coming out of the press use that information to shape strategy.

That’s the finding of a rigorous academic study, Burr Under the Saddle: How Media Coverage Influences Strategic Change (free registration required). Negative media coverage may be unpleasant and set teeth to grinding in the C-suite, but it also can serve as the catalyst for companies to make significant strategic course changes that lead to organizational improvements.

That’s entirely consistent with what many PR practitioners may feel is one of the more unpleasant facets of the job: sharing and interpreting bad news and even advocating for the press’s point of view. (Academics call it “boundary-spanning.”)

The researchers, from the University of Illinois and the University of Arizona, studied 250 firms from the S&P 500 over five years. They scrutinized 40,000 articles from major business publications, seeking negative keywords and phrases that signified negative coverage. The reporters’ words were frequently the source of the negativity, but sometimes it was contained in quotes from CEOs and other company sources. The volume of downbeat coverage correlated to the odds that the company would revise its strategy in response to the issues that drove the coverage.

“Negative media coverage about a firm is a salient trigger that suggests to top managers that the current strategy needs to be changed,” the authors assert.
The greater the number of independent directors who sit on the board, the more likely the negative coverage produced that effect, because external board members are more inclined to pay attention to external reporting.

“When there are board members with familial or business ties on the board, they are less likely to be influenced by … outside perspectives, including the media,” according to the researchers. “That relationship between negative media coverage and strategic change gets stronger when you have outsiders on the board.”

This finding offsets the chicken-or-egg possibility that leaders would have changed the strategy anyway.

There are three ways negative media coverage can drive change:

• Exposing tangible actions, such as an initiative that isn’t paying off.
• Providing a channel for stakeholders (such as investors) to amplify their messages. For instance, the coverage of opposition to bank decisions to impose a fee for ATM use.
• Revealing company misbehavior, such as unsafe working conditions.

Not surprisingly, the study also finds that the more success a company is enjoying, the less likely it is to make changes no matter how harsh the media spotlight. Strategy+Business magazine concluded, “Positive stock performance can paper over bad news to an extent, but ignoring the warning signs is a missed opportunity to correct problems that could become even more damaging down the line.”

Even when a communicator is part of the C-suite, is he or she providing the kind of media analysis that can drive positive change? Most of what we hear about media relations is focused on earning positive coverage, not synthesizing negative reporting. The study also didn’t address social media, where non-journalist bloggers and participants in online discussions have a similar impact.

Nestle, for example, found a new source for palm oil after environmental activists took to its Facebook page. Yet research from The Conference Board and Stanford show that boards of directors and C-suites aren’t getting social media reports. I wonder if they’re not getting reports of mainstream business reporting, either.

The old clip book was a useful way for leaders to stay abreast of how they were being reported and perceived.